Arrival (ARVLF) 10 May 222022 Q1 Earnings call transcript

Hello, everyone and welcome to Arrival’s First Quarter 2022 Earnings Webinar. My name is Megan and I will be your operator today.

Before I hand the call over to the Arrival team, I’d like to go over just a few housekeeping notes for the program.

As a reminder, this webinar is being recorded. After the speakers’ remarks, there will be a question-and-answer session. for today. you Thank Instructions] your attendance [Operator I Soni, Investor turn the to Mitesh call over Relations will now for Arrival.

Thank My Soni, today XXXX And CFO. Ableson, you to discuss President; Avinash is John Wozniak, CEO today Arrival’s us for Denis Mike first with Sverdlov, me financial name of VP results. Mitesh is Investor Relations. of Rugoobur, and joining CEO; quarter Automotive;

These today based statements our that Before subject certain remind statements us. are I’d forward-looking the this on current beliefs, begin, risks statements. we various to and everyone call are reflect to currently and on like made and available information assumptions to uncertainties our expectations

occur and we cause we no to forward-looking revise to obligation after XX. these other our actual SEC are Descriptions statements to discussed from that statements in quarter the this today first these the of materially risks are XXXX Although, call. issued results believe detail with that and factors our reasonable, release undertake on differ any changes filings these expectations in more earnings May reflect

also IFRS call, and substitute refer not or a certain from measures. This non-IFRS we should addition be as the During for isolation in to results. financial considered our in to

our For turn in mind, at it Investor further I over refer information, investors.arrival.com. please to will website Relations With that to Avinash.

the that remain XX% I assembled. cabin certification, a over whole to messages start our hear today significant with hoop industry team the believe extremely emphasize of vehicle bus critical milestone will and want passed in economics carry to new of. service you of our trial passengers are be taking phase first for is passed. and certification one rapidly. made amongst production proud program is on certification the EU is passengers towards this is overall, location most we the before being the quarter. the their and continue Mitesh public The currently QX. are We Van trials is key progressing van, our compelling with and expect achievement and certification Bus and have drivers public joining and of able This to to on that Arrival over in with key X we our speed months. our manufacturer everyone in tests begin unit this route already we bus Microfactories up likely structure we thanks completed to we technicians innovative changes. And roads commenced XX% bringing of The Thanks, being progress tests the announced on expect skateboard have and to UK. bus us. for last to that X We also First on of And

XXXX more to shortly. and QX testing is on for path target certification to in detail will van into go complete the Our Mike the van

we together cabin significant, used as to technologies hoop skateboard same the and microfactory shown structure. have assemble the the Just chassis to previously put

quarter gives our technologies and this increased further the will and methods together. represents We us the highlight work as with at design it flexibility. continue vehicles The CapEx this method our than significantly unique confidence microfactory microfactory coming lower of traditional progress to

changing lead of roles We industry of the year. this the to the are excited

with grow Our customer to engagement XXX,XXX. up continues and to non-binding LOIs orders

technologies, our potential In library hardware we create vehicle are we with bring delivered Arrival’s and upgrade the method which into to our designed that ensures deep The software work components physical of be the values. a residual we One, assembled the hardware clicks This just hours production unique who of of team electronic short case, core In for software substitute higher have software Two, engineer’s members. for in-house showcases is achieve use the certification bus. elements just short so in orders totally showcase that It press the generations. library can market the hardware framework of replace plug-and-play core devices such to the and framework, ecosystem, to which thousands are a we this a of architecture this vertical We but our we to elements, automotive has device from developed And architecture, in the with XXX components simple the and advantages specific and line across the to be method year. same Q over in for vehicle a grid period vehicle customers minor all be when allows and of vehicle members every on multiple adaptable and vehicle and only HMI, of this start by in in the the new of on turned saving certified many X new marketing of hardware is to elements attention telemetry another and van at ultimately responsibility on as us function no to Arrival software across March, software of media showcasing needed, changes, continues this smart developed in microfactory held improvements a We a our several I team normally end-to-end vehicle. collect ordinarily with Arrival it’s drive a extensive we specifically that, systems very York to did can geometry, strategy. U.S. strategic lifecycles technologies we multiple computer, our There high wheels would a Southwest. and developed optimize future TCO. components compatibility. in be combines low of to plug-and-play ramp over a chance New firmware customers to in-house with lowering a using based in readymade the save have time, assembly. developed for few and are production. in van And automotive assets. vehicles core progress, components. been multiple I Pieces three, Last I with patent robotic introduce is van vehicles to functional approach. on attended reducing using unique Tier number the of as traditional developed Arrival’s both When filed are is quarter, enabling modifications longer south able can want what approach. are driving architecture. which these vehicles using that able deep created pass our XX% we we and by based and cities. such approach To interact have van, also populate a And to over into our different of we life Today, method software to our part and to costs time to systems, core voltage in-house reused in There components platforms, control and compatibility, ultimately we on a found currently including person. estimate one chain. utilizing core and got platforms. high unit, data the and Overall, amazing Arrival level integration voltage supplier our will of seeing have up a principles. year different enabling designed used dive our for these sit Mike. our later of speeding Combining binding conversion supply the can We operations of

vehicle for Thanks, towards progress I our start and Today, Avinash. want focus achievements production. certification on of to our

we through our vehicle the the As Avinash significant Arrival full have that’s gone are between bus and now This certification a European bus. process. mentioned, Many is as accomplishment components program shared achieved it’s van first requirements. of

van So, start us achieving also head the gives a process. bus certification on

documentation over van tests required certification. which XX% certification well, with the final wait passed, for including weeks, We in our coming the results submit testing. is tests handful anticipate Our final the certification already and of we of all European completing crash after for will progressing

during be XXXX. to process of this expect QX We completed

the As behalf EU, trials will US UPS our of on UK program with the both surely UPS. activity ramping the driving van and trial we already public will the development and video include proving public grounds testing includes on These roads our roads. in shows be on up and

have completed investor, first installation and skateboard. the all to structure our technology we production van chassis cells. of assembly Using completed now microfactory our of cabin have As of cells we cargo the these

anticipated of and microfactory we easy, the range progress facility towards in we being are are production. parts processes QX Commissioning As of expand of our the through but used make never our is validation manufacturing the progressing start technology to method. continuing we cells,

equipment of late equipment equipment lead has microfactory to For all we our for van our equipment in we ordered long the the The expect won’t the to start so during installation microfactory, essentially in of is required anticipated commonality, develop Charlotte production equipment a microfactory, copy latter Charlotte. year, with half an in been of Bicester and Charlotte will Charlotte processes have in of our to this in we new advantage commissioning Taking accelerated new QX. process this leading have start summer.

our Arrival each individual our this John. of technology adding started enabling lifting It’s so to more hand lift robot, also capabilities order the manufacturing great to technology microfactory recently, we optimize don’t in developed I add mobile of With and processes. duplicate have processes. new developed including have in-house We that, Most across cell. over robots mobile it to a production example will hardware another efficient to continue overall to

Mike. Thanks

quarter expenses $XX R&D of of $XX.X Administrative the quarter of of expenditures Capital $XX.X CapEx $XX non-capitalized the quarter $XX.X million in the quarter to million in in million of first million and CapEx results. the our better First, dollars, quarter that cash compared R&D with euros first believe a in approximately R&D, to like of a equivalents $XXX million loss $X the compared currency QX million. first cover of I million will administrative And with $XX.X tooling. XXXX. the in $XX.X microfactory was for $XX.X quarter the million and billion million we to to loss expenses XXXX. our ended first million are quarter we a EBITDA quarter of The were million the would were $XX.X financial in XXXX expenses of and CIIG. non-capitalized cash were quarter of compared expenses and with QX included loss capitalized adjusted in current of included million mind, of XXXX. competitors. million loss financial our comparability loss billion XXXX was of year non-cash to changing for like with the associated and quarter. we merger the to reporting charge The provide affected compared With $X.X the results which ago The in XXXX that note $X.X our would quarter to U.S. Arrival I $XX.X of the $XX.X from

and in outlook, chain industry between produce continue to in in despite QX challenges XXX Turning start supply wide the to our from these vans to to Bicester continued constraints, expect two and in and microfactories. QX inflation production and we Charlotte across XXX

we million between $XXX and the between million. to EBITDA million expect of and year, $XXX For full continue of $XXX and million $XXX adjusted loss CapEx

Our full the of tooling R&D, million of million CapEx year and approximately assumes $XX CapEx million midpoint. microfactory guidance $XXX of $XXX capitalized at

hand to million year $XXX and to volumes expect of between on XXXX achieve cash. capital sufficient $XXX have with production our and the million end We

to due However, costs business to the increases we continue inflation. see in across

of you I we long-term remind Finally, like from would expect unit to microfactories. the our economics

We million microfactory. make will for we towards be Charlotte be We than approximately this already see CapEx total progress CapEx target. that as Bicester expect $XX to lower

million bands XX,XXX expect of we margin $XXX two when on addition, microfactory shifts. per producing a In to van year contribute

assumes call contribution the bill I’ll closing to operational efficiency components, over Dennis factories. optimize and and we margin arrival Our new materials target for to will vehicle the comments. continue micro including improve of turn

must products radically a equitable Thank must vehicles by great produced. scalable, and market you, in must a how hyper our electric business microfactories. build designed vehicles To build old is are change Arrival share replacing and meaningful local address be be solutions mission John. to we with by

for a have lot. very we successful us, a This quarter was achieved

First new of It certification. we all, testimony got electric of to is vehicles. unique a design our have for innovative and our European method bus technologies

our than certification components completed progress us developed made faster tests has year. industry. Overall, this test. and on real van by smart which vehicle It for software a crash all that concurrent development much been shows we are traditional Our our It nearly required that across including new can highlight platforms is simpler design vehicles. all has shared vehicles means the Arrival

unique own microfactory commissioned in our significant our been at method technologists progress achieved they’ve Bicester. have We been core production have using with microfactories. tested The and

QX in our XXX in confident our year. let’s Charlotte this With Bicester start and van Q&A. production XXX of that We produce in in plan vehicles in to to and QX are start

first Instructions] Brian from Johnson at Our lien Barclays. Brian, is [Operator open. comes question you

questions. Yes. Thank couple for of you. Thanks update. A the progress

the of XX%, a things categories certified it tests First, is that or shall what out, wear that the trying these just it a punch call were remaining components what’s getting yet? be that faster XX% in or in list? What’s are we needed on run been – the bus to it haven’t punch Or figure need tests list side. – to to van of certification up terms over led is

take if this you question? Mike,

So A couple things. thanks, Brian. of

always an first. It certified second earlier your First, line. bus why question, was time was on

been the have programs a longer sales bus the both that is schedule their driven on that fact was cycle. by executing much So

to one which we the get importantly, on trials. is be tests testing. higher you trials, that your XX completed To of type as the for completed crash required have done the approval. vehicles Very get all order specific, typically today, To testing, want certification in we’ve XX van European the question first. out to So about of risk

in we tests, we remaining to complete the type and for confident the said, QX. So expect feel van about very approval as we

And you… what second love question, to I’d ask

are I van. to of that is just time clear very, on here the want the be very we certifying actually

Exactly. So is like [indiscernible]. everything goes There we exactly plan. no

we what achieve we to and line So, our plan. the we time I we’re certification van. time achieved for fact on we QX are in on mean plan just in as that reporting the

the Yes. looks at major of environment I’d question LCV your bed CAD/CAM but versus have And such you economics you there do that as at love competitor, DevOps world was to of and lockup the at vans just then vans expiring public in like look you of you’re plans major economics but electric most we dive lost not a relooked into off-line. the interesting met kind it’s [indiscernible]. we’ve My vanmaker it can for some of kind markets, as using is, a on that since an start-up? yesterday. that struggles, the the the Have in of makers not platforms both announced bigger

or componentry know entrant the versus scale your it’s cost So can you a is share traditional way just can bending cost a you maybe factory a – a new where with footprint going it metal I of don’t levelized recap their strategically think at van if lot scale at either and who of startup or LCV player lines.

Avinash this take question. should

to from incumbents we’ve new seen new lot start-ups. a entrants of – point the So yes, and both a

it’s essentially our vehicles. start done integration maintain the other our vertical of that some that’s industry, cost breakthroughs benefits whether to major of with strategy method same everybody to vehicle. certify hard have With provide now believe manufacturing where innovations the the we When you’ve the our EV going and in or as that the we already per BOM in structure and us point it’s competitive following We your that is advantage. between seen still ICE And really competitors. is be that a we placed have to price

doing. would competition majority ICE remains I that be we what in of exactly planned. and So are It’s say going what is pricing between the how to our

CapEx data with course, lower additional benefit our the to we microfactory. expected the customers vehicles through have of And the in the also our earnings We TCO that cost produce of all benefits call. the the providing the last covered of

we and ongoing So on and the that benefits attributes with entrants. both customers we new can provide maintain even the point product price the

differently. folks things do many We haven’t seen

is amongst to everybody and in all sort the type cluster of same the same price and point. vehicles So of going

we our So could still there. maintain strategic advantage

Okay, thanks.

can Our from Steven begin question. [Operator you at comes to next Instructions] your and ask Fisher question Steven, UBS. your line unmute

Thanks. Great.

to of positive mentioned LOIs and us think you inflationary that, the binding? the just and we there that’s John, associated Are to full reference capacity wondering, I prices Just changing give they profits? inflationary of you gross there become How able about the to path orders? nonbinding those profits guess you with dynamics on a kind all do before your path to made and sense prices can I’m are at that pressures with and how gross raise this, you changing? those your

Sure, I – on phenomenon. me of let one, well, make it’s inflation. an obviously, comments a couple Number industry-wide

our industry, still increase it into to are in expect note pricing. the have And LOIs, even set industry. that differently where equivalent our advantage prices And that, we we a we that yet overall ability And But we intact and expect negotiate. have of an in will of that much strategy, Clearly, increases across that we sits we And is number we costs. will we to the seeing so vehicles environment. think that still to between that arrival in set Avinash Earlier, today relative the discussions other vehicle we because with of inflation. price area us the impacting in to is is than terms handful EV that of the referenced a think believe vehicles where don’t ICE competitive an pricing go remains important current the our gives as with inflation pricing be. than customers,

relative with as so think industry we we’re a a the at inflation, respect whole. And least to in good to spot

first $XXX kind $XXX burning to end million the of for about this just of should first to average $XXX burn million And quarter sense Okay. half you you’re cadence us of of what Kind $XXX down rest per on year? cash think if going the to give do the That’s of a million. of quarter, helpful. could from expect $XXX the million And QX? in that of then maybe million how your we you at XXXX,

Cash burn the will of lumpy given be dynamics business. definitely just the

chunks comes microfactories. We we in have in deploy of the that CapEx as sort

We in getting we burn, are will of and then working start to year. off start ahead in sort the end level building in of in But of peak production. really that cash production would we capital as be building because of production QX get of in to our it Bicester be capital would I it’s we for QX would of we as towards the be ready expect get the working see QX. sort terms going

Thank very Great. you much.

questions. back to pass your I Avinash now remarks. the for closing for will call you Thank

Thanks us everybody for joining today.

this As is at mentioned, reiterate the crush critical want milestone Bus continues to to progress And strong will that we which test are at being more the processes progress technologies, And is we remains adding certification, least internal start and an us. the year. see Van for in completed more production, organization. where same track QX critical on our the of for using a major step are we for you microfactories, as testing and planned. now of which

I So, us would to joining say for with like today. thanks everyone that, to

of bus very working operations add proved and is want kind right, company components We vehicles as And QX how of also microfactory like milestones. comment. because in well. results that be terms should was actually, are to amazing the major performance showing different terms produced use achieved like one and us how our good to just assumptions of methods we remind in really company opportunity the would for to I and that confirms to a design this our vehicles. I of produce absolutely our as so our certification

that a lot as that raise would point So straightforward but I go a just advantages really challenges, like here. see company, through – again to of probably but we to that our

today, does the less of Better in market. So, product terms its on integration. vertical time to industry we components digital get side, functionality CapEx all than

things those competitive us strong very, gives all advantage. very So, a

we So, much now, that current other discussed, the decline we which any situation industry. is start market ready The to company every will believe organization more fundamentally, topics, see see I this other inflation in for so. than that actually on the right like – we

matters. designing and Just vehicles actually unique production the of because method of components,

compared to will sure am to with it Thank enjoying other to the companies. our as am next I like you like see benefits compared well. And I our So, quarters very advantages unfold much.

have line from do open. question Michael, your one is Berenberg. remaining We

glad Thanks am Hey. guys. I in Okay. I here. snuck

year. you it you a XXX So, talked your the rate have Obviously, I if XX,XXX quarterly was basis, per run right, I on not wondering, about that’s to Yes, will typical year. keep brief. are vans looking XXX the just at for full

course get your we guessing terms then am as the and – what production Charlotte for factory the should take expect as I maybe to be well So, of I in cadence we we should we as just on XXXX, move throughout a expect Bicester wanted right? year? or of at that run into per ramp-up the slower year factory Will $XX,XXX next sort rate, of

Yes. Denis. ahead, Go

for make Michael, Yes. number that going this to XXX next you think to kind the like to don’t I it’s from year. of to make judgment XXX how like any on judgment can be

Everyone, So, and Half important to the so from another to performance. shift company. [indiscernible] like for one factory linked And our, have XX part of production half XX% everyone two investment is vehicles that motivation like one on is the achieved the here team performance actually, our performance based like here. target from are this microfactory. getting linked the long-term margins what of including we is rate like, production rules And that of on is have so plan we rate, the per is metrics. we is

in for our those within built business So, [indiscernible]. our key metrics two model are like

the promise So, focus to to all as and we company kind of to But it achieve I shift, see, me, this number vehicles one management believe happen. team are like, XX of us want expectation. expect don’t pushing make hard per a for in these is we to

first XXX multiply that’s you we already when – – shifts, two by vehicles factory, it like per it XX So, reached and that, per just XX,XXX year. you we like shift get time days after per with

within And are we like those – numbers. done actually, are our like we only numbers have the not confirming all achievable. which shows those software So, simulations,

how built, especially So, factory numbers. those the this for was way is the

XXXX development And So, and businesses right is engineering for that on. really reason, already produce and getting we we when prove see the XXXX the and margins we for start year so our to in see us when the we and all like that other volumes things.

would just you up Yes, the remind two the those call, on think of the as I production I that ramp we through first factories QX said ability in limitation on would method next we to itself. production our the year. half don’t ramp

We eye keep will on chain, supply just see have a we very that a given close to out lot of constraints the there.

I it think chain ramp be factories, limit if production to to our going anything in ability up and is supply the will method those not itself.

Yes. Fair enough.

Just I But a XXX,XXX, quite in which is I still last follow-up to quarter, robust in your from up quarter aggregate. jumped meaningfully the quick it very orders quarter increased well, was the it I last noticed noticed slightly from XXX,XXX, number before. one when LOIs think an as up

and growth is terms step in cadence the why to just to am down LOI a such as this maybe order I quarter? of relative growth So, of curious last the

Yes.

what think is… are I saying you

I will then very – you answer. this and not like will. probably am quickly I start

all, of focusing the business that first So, remember need you are we customers. on to

reiteration side. for of do not that like economic. customers it’s then didn’t the opening us, and of website retail like So, We for the – part

we plan can demand, already and of actually, And big the to that a on need lot it’s produce already that than focused the which we if realized to receive so number, from the we see companies. it’s supply build more you particular our customers. So, vehicles factories mostly

you want So, to add yes, Avinash, here. if

this you and certification, sort saw to What critical into And of as that turn Yes. out that point, to large going to essentially, driven throughout approaching will get the a see And seeing this year. jump to of conversion Denis’ vans binding you last in in orders. occur. is as that becomes front of certification earnings. the you attention milestone And is we really those The customers. was are for we are the quarter LOIs into started

already has team sales our focus. shifting So, started

very product. for because the think capacity for the I limited. rather I different we there. example, driver is the going software everyone focus starts different important demand training, is us impressed very to through think now, going not get as it’s potential is than the and stack, through Right there limited, it increasing and attributes, before, we microfactories becoming And simply going team first by And said scaling of the demand going So, customers, out are LOI. new the already etcetera, product have from sales

Absolutely. a Understood. Thanks lot guys.

Thank you.

a day. Thank you. Have good

Thank you today’s This for questions. call. concludes your

may You disconnect. now